Timely and Relevant News: Ukraine - Understanding The Market Reaction

Russian military forces attacked a broad range of targets across Ukraine last night while Russian President Putin vowed to replace Ukraine’s government.

While the market reaction is likely to be more acute than the response to Russia’s illegal annexation of Crimea in 2014, the attack on American interests is less direct than Iraq’s invasion of Kuwait in 1990.

Stock market drawdowns from geopolitical shocks average about 5% with recovery occurring within approximately two months. Larger conflicts in sensitive regions can be deeper and last longer.

LPL Research does expect further market volatility as the situation unfolds and elevated uncertainty may persist for several weeks. If the conflict is contained, LPL Research does not expect long-lasting contagion to broader markets.

Upward pressure on commodity prices - already impacted by COVID-19-related supply chain disruptions - may see a more sustained impact as economic sanctions play out and will probably be the main source of risk for possible broader economic repercussions.

Early year momentum in European equities relative to U.S. counterparts may stall as the crisis plays out.

For most investors, we believe understanding the typical market response to geopolitical risks and focusing on where we’re likely to be at the end of the year rather than at the end of next week or month is likely the best response. From a purely technical perspective, we continue to see near-term opportunities in commodity-exposed equities.  

Our Covenant Wealth Strategies investment team is closely monitoring the unfolding situation We are taking advantage of the opportunity to harvest tax losses in our client's accounts. We will be making any appropriate tactical shifts in keeping with our strategies. It is important to not lose sight of your long-term goals and to maintain your perspective in the midst of market volatility. 

If you have specific questions related to your own investments or financial planning needs, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up time to discuss how we can assist you. 


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.